Colliers International’s Global Industrial Midyear 2013 Highlights Report indicates that despite anaemic job growth, the demand for industrial warehouse space and modern distribution centres remains strong in Australia.
Managing Director of Industrial at Colliers International, Malcom Tyson, said Sydney and West Melbourne have been identified as the booming industrial precincts of Australia.
“The Australian industrial market continues to offer world beating yields and prospects of steady, stable rental growth, which are features attracting REITs, syndicates and private investors to the industrial precincts of Australia - particularly Sydney and Melbourne West,” Mr Tyson said.
“Through the end of the year, we expect to see global market resilience, increased demand for logistics and distribution centre space, and development driven by build-to-suits particularly in those industrial precincts that have a close connection to major transport infrastructure."
According to the report, Sydney now ranks tenth in the world’s top industrial warehouse rents. London has been ranked in first position, followed by Hong Kong in second and Singapore in third.
The findings by Colliers International show Sydney is continuing to attract offshore capital as more foreign groups show interest in and acquire industrial assets.
According to the report, this interest is being driven by strong tenant demand for Prime Grade assets, accompanied by insufficient supply and low vacancy rates.
In Melbourne, Colliers International has found that the majority of industrial space remains dominated by the logistics and transport sector in West Melbourne.
In comparison to Sydney, Melbourne’s industrial warehouse supply chain is holding strong in areas such as the Port of Melbourne (west) and Melbourne Airport (north).
In Brisbane, Colliers International research suggests a decrease in investment activity, with a report of only six transactions over $5 million in the first half of 2013, compared to fifteen transactions in the second half of 2012.
These results are due to a lack of vacant stock, with occupied industrial floor space increasing from 285,433 square feet in the second half of 2012, to 360,892 square feet in the first half of 2013.
Because of this, prime grade net face rents are expected to grow 1.8% in 2013, from 2012.
The leasing demand in Adelaide remains solid, however there is an expected shortfall in A Grade stock, which will result in pre-lease demand for design, construct development and the redevelopment of olden-day style buildings.
Colliers International expects Adelaide to turn over moderate rental growth in 2013 as businesses make strategic purchases and sell non-core assets.
Modest yield compression, expansion in values and core precincts are expected from Adelaide in Q2 2013, once transactional activity is underway.
Mr Tyson also commented on the industrial industry’s rough start to 2013 from an international perspective.
“While markets like Hong Kong and Sydney are nearing full occupancy, other markets like Seoul are experiencing uneven industrial demand,” he said. “Latin America and EMEA are also working to manage some imbalance in supply and demand.
Key findings specifically in Asia and the America’s include: